Borrowers can rest assured that interest rates won’t be going anywhere in the foreseeable future.
Australia’s cash rate remained on hold earlier this month at its record low of 2.5 per cent, where it has been since August last year.
At its June meeting, the Reserve Bank of Australia board said it would be prudent to leave rates unchanged, with no indication of any movement in the near future.
“Given this outlook for the economy and the significant degree of monetary stimulus already in place to support economic activity, the board judged that the current accommodative stance of policy was likely to be appropriate for some time yet,” the board said in the minutes of the meeting, released on Tuesday.
Low interest rates were working to support demand but it was hard to judge whether that would offset the effects of the tough federal budget and expected declines in mining investment, the board said.
“Those uncertainties were likely to take some time to resolve,” it said.
Although March quarter gross domestic product growth was above trend, as the RBA had predicted, this was mainly driven by strong mining exports and was not expected to be sustained.
“The expectation of substantial falls in mining investment, below-average growth of public demand and non-mining investment remaining subdued for a time implied that the pace of growth was likely to be a little below trend over the rest of this year and into the next, before gradually increasing,” the board said.
The central bank repeated its familiar phrase about the Australian dollar, that rises in recent months had diminished the exchange rate’s ability to assist in achieving balanced growth in the economy.
“Members noted that the exchange rate remained high by historical standards, particularly given the further decline in commodity prices over the past month.”